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Some of JC Penney's big sales are misleading, say employees

Jeff Rosen, NBC Today
Wednesday, 24 Jul 2013 | 8:26 AM ET
Adam Jeffery | CNBC

A warning for bargain shoppers: Is your favorite retailer misleading you with those big sales? We've reported on this before, and now we're back with a new development.

We all love a good sale, and when you see that sign — 20 percent off, 30 percent off, 50 percent off — you assume you're getting a deal. But we found that sale price may not be a deal at all.

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We first told you about this last month. Well, right after that story aired on TODAY, store insiders emailed me, speaking out against one of the country's most popular retailers. And what they say may change the way you shop.

The allure of the sale: prices too good to pass up. And we eat it up. But now, two JC Penney employees say some of those amazing bargains aren't bargains at all.

A few months ago JC Penney changed its pricing model, from everyday low pricing to sales. The company says that's what customers wanted. But these employees say JC Penney was really just artificially inflating prices, then putting those same items on sale.

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Gena Stone says she did it when she worked at a JC Penney in Virginia. "All of a sudden, the rack of $7 shorts became $14, and then they were 50 percent off."

"What did you say to your bosses when they asked you to do this?" we asked.

"They said it was coming down from corporate in Texas," Gena told us.

"Were you comfortable doing it?" we asked.

"No." Gena replied.

Gena quit the store after six months. Bob Blatchford still works at JC Penney, at a store in Florida. He told us, "I saw a lot of pricing teams going through the store, raising the prices, mostly doubling — towels and clothing."

"Double the price?"

"That's right. Then they would go on sale, and they wouldn't always go on sale for 50 percent off," Bob said. "So it was— not only was it a fake sale, but they were actually paying more than they would have been previously."

"These customers think they're getting a good deal," we said.

"Right. And they're not."

'Very widespread' issue

At JC Penney, we found a Dyson vacuum cleaner advertised on sale. Regular price: $725. Sale price: $649. It sound like a great deal, but we checked with the manufacturer: Turns out that sale price is the same as the suggested full price.

"How widespread is this?" we asked Priya Raghubir, a professor of marketing at New York University who says many retailers use those "sale" signs to lure us in.

"I think it's very widespread," she told us. "You feel smart, you feel happy, and you feel you've got a great deal."

"Are stores playing on our emotions?" we asked.

"Yes, stores are completely playing on our emotions," she said.

In a statement, JC Penney told us all its items put on sale must be "previously sold at ... regular price for a reasonable period of time" — and its pricing model is common in the retail industry.

"I don't think what they're doing is right," Gena Stone said. "And it's to their detriment."

We asked Bob Blatchford why he emailed us and decided to come forward. "You could lose your job for this," we pointed out.

"Because I thought it was wrong and I thought the public had a right to know," Bob said. "And I don't think Penney's will survive if they keep doing this."

So how do you know when a sale is really a good deal? Here's the takeaway. Before you buy anything, ask the store clerk: Was this product ever sold at the regular price? And how long has it been on sale? If it's been on sale for a while, that's a red flag.

Statement in response to this report from JC Penney:

"We certainly acknowledge that a significant amount of changes were made over the last year under previous leadership. It's no secret that some of those changes worked well and some didn't. Today, we are actively listening to our customers, addressing their needs, and making changes for the better — all based on customer feedback.

Last year we implemented an everyday low pricing structure that was ultimately rejected by jcpenney's core customer. We learned that our customers are motivated by promotions and prefer to receive discounts through sales and coupons applied at checkout. As such, we have returned to the promotional pricing model employed often in the retail industry. This shift requires us to make pricing changes on much of the merchandise to remain competitive. In addition, under this promotional pricing model, any time an item is put on sale the item must have been previously sold at its original or regular price for a reasonable period of time. While we understand this transition back to promotional pricing may cause some temporary confusion, the Company remains committed to delivering the quality, price and value that customers expect from jcpenney."

—By Jeff Rosen, NBC Today

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